Exhibit 10.8.2
ENHANCE FINANCIAL SERVICES GROUP INC.
AMENDED AND RESTATED
CHANGE -IN-CONTROL PROTECTION AGREEMENT
AMENDED AND RESTATED AGREEMENT dated November 15, 1999 by and between
Enhance Financial Services Group Inc. (the "Company") and [Name of Executive]
(the "Executive"), amended and restated as of December 8, 1999.
WHEREAS, the Executive is a key employee of the Company and an integral
part of its management; and
WHEREAS, the Company desires to recognize the Executive's commitment to
the Company and to confirm the right of the Executive to certain severance
benefits in the event of termination of the Executive's employment under certain
circumstances following a Change in Control,
WHEREAS, to that end the board of directors of the Company adopted a
Management Severance Protection Plan in 1998, which it amended September 23,
1999, and the terms of which as so amended, insofar as they apply in the event
of a Change of Control, are reflected in this instrument;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the Company and the
Executive do hereby agree as follows (capitalized terms herein having the
respective meanings ascribed to them upon their first use or as set forth in
Section X hereof):
I. SEVERANCE BENEFITS:
If a Termination Event occurs during the twelve months
following a Change in Control (the "Protection Period"), the Executive
shall be entitled to receive the benefits set forth as follows:
1. CASH COMPENSATION: The Executive shall receive, in a single
lump-sum payment, an amount equal to the sum of (a) two times his or
her Annual Cash Compensation; plus (b) the greater of (i) the bonus
paid the Executive in respective of the calendar year immediately
preceding the Date of Termination or (ii) the bonus paid the Executive
in the year preceding the calendar year in which the Change in Control
Date occurs (provided, that, for purposes of both subclauses (i) and
(ii), if the Executive shall have been employed by the Company for less
than the entire such relevant preceding calendar year, then the
applicable bonus for such subclause (i) or (ii) shall, in lieu of that
set forth above, be the target bonus which would have payable to the
Executive in respect of such relevant preceding calendar year),
pro-rated over the period beginning January 1 in the year in which the
Notice of Termination is given and ending on the Date of Termination.
Payment of the aforesaid total amount shall be made no later than 30
days after the Date of Termination. If payment in full is not made
within the aforesaid 30 days, any amounts due and owing shall earn and
be allocated daily interest beginning on the 31st day following the
Date of Termination and ending on the date payment is actually made at
a rate equal to 1/365 of the annual
interest rate payable on one-year U. S. Treasury Bills in effect as of
the business day coincident with or next following the Date of
Termination.
2. OUTPLACEMENT: The Executive shall be entitled to receive
six months of outplacement services commensurate with the Executive's
status level and at such outplacement organization as the Executive
shall select. The Executive may not elect to take cash in lieu of
outplacement services. Such outplacement services shall commence on
such date as is designated by the Executive but in no instance later
than six months after the Date of Termination.
3. WELFARE BENEFITS: Commencing on the Date of Termination and
continuing for a period of 24 months (the "Benefit Period"), the
Company shall provide the Executive with life insurance (including
group term and supplemental executive life insurance), health insurance
(including, but not limited to, medical, dental and prescription drug
benefits) and long-term disability insurance ("Welfare Benefits")
substantially similar in all respects to those which the Executive was
receiving immediately prior to the Notice of Termination. The receipt
of the Welfare Benefits shall be conditioned upon the Executive
continuing to pay the applicable premiums for such Welfare Benefits
that the Executive paid immediately prior to the Notice of Termination.
Benefits otherwise receivable by the Executive pursuant to this Section
I.3. and the corresponding premium payments made by the Executive,
shall be reduced to the extent substantially similar benefits are
actually received by the Executive from any other employer during the
Benefit Period at a cost to the Executive that is commensurate with the
cost incurred by the Executive immediately prior to Notice of
Termination; provided, however, that if the Executive becomes employed
by a new employer that maintains Welfare Benefits that either (a) do
not cover the Executive or a family member or dependent with respect to
a pre-existing condition for which there was coverage under the
applicable Welfare Plans of the Company, or (b) does not cover the
Executive or a family member or dependent for a designated waiting
period, or at all, the Executive's coverage under the applicable
Welfare Benefits of the Company shall continue (but in the event of
non-coverage due to a preexisting condition, limited to such
preexisting condition) until (i) the end of the applicable period of
non-coverage under the new employer's Welfare Benefits, or (ii) the end
of the Benefit Period, whichever occurs first. The Executive shall
promptly notify the Company of any Welfare Benefits actually received
from another employer. During the Benefit Period, the Executive shall
be entitled to elect to change the Executive's level of coverage and/or
choice of coverage options (e.g. Executive only or Executive and
family, or deductible options) under the Welfare Benefits of the
Company to the same extent that actively employed senior executives of
the Company are permitted to make such changes; provided, that in the
event of any such changes, the premiums paid by the Executive for such
Welfare Benefits shall reflect any cost increases or decreases that
would actually be paid or received by an actively employed senior
executive of the Company who made the same changes. For purposes of
this Section I.3, any measurement of Welfare Benefits, premiums,
payments or costs that is based on the Welfare Benefits, premiums,
payments or costs that the Executive was receiving, paying or incurring
immediately prior to the Notice of Termination shall be determined
without giving effect to any change thereto during the Protection
Period if Notice of Termination was due to Good Reason. To the extent
the Company is unable to provide the Executive
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with any of the Welfare Benefits required by this Section I.3, the
Company shall either purchase such Welfare Benefits for the Executive
or pay the Executive a cash payment equal to the value thereof.
4. Equity-Based Awards: (a) As to all his or her outstanding
stock options, restricted stock and any other equity based awards and
insofar as not inconsistent with the terms of the Company's plans under
which such awards were granted (the "Incentive Plans"), at the option
of the Company, either (i) the Executive shall receive a cash-out of
such awards or (ii) to the extent that such awards are not cashed out
they shall become (A) fully vested as of the Change in Control Date and
(B) if susceptible of exercise, exercisable for a period 90 days after
the Termination Date.
(b) If (i) the Executive is terminated as provided for in
Section VIII (Termination in Anticipation of Change in Control) , (ii)
such termination results in a forfeiture of any of the Executive's
stock options, restricted stock or other equity-based awards under any
of the Incentive Plans, and (iii) the Executive is entitled to receive
payments under the aforesaid Section VIII, the Executive shall, subject
to the provisions of Section VIII, be entitled to receive a cash
payment equal to the amount the Executive would have received under
such plans with respect to such stock options, restricted stock or
other equity based awards as if the Executive had remained in the
Company's employ until the Change in Control Date. Such cash payment
shall be made at the same time and in the same manner as payment would
have been made under the applicable Incentive Plans had the Executive
remained employed by the Company until the Change in Control Date.
5. Tax Reimbursement Payment: (a) If any amount or benefit
paid or distributed to the Executive by the Company, whether pursuant
to this agreement or otherwise (collectively, the "Covered Payments"),
is or becomes subject to tax imposed under Section 4999 of the Code
(the "Excise Tax") or any similar tax that may hereafter be imposed,
the Company shall either pay to the Executive or contribute for the
benefit of the Executive to a "rabbi" trust established by the Company
prior to the Change in Control Date, at the time specified in this
Section I.5.(e) below, the Tax Reimbursement Payment. The "Tax
Reimbursement Payment" means an amount which, when added to the Covered
Payments and reduced by any Excise Tax on the Covered Payments and any
federal, state and local income tax and Excise Tax on the Tax
Reimbursement Payment provided for by this agreement (but without
reduction for any federal, state or local income or employment tax on
the Covered Payments), shall be equal to the sum of (i) the Covered
Payments, and (ii) the product of (A) any deductions disallowed for
federal, state, or local income tax purposes because of the inclusion
of the Tax Reimbursement Payment in the Executive's adjusted gross
income and (B) the highest applicable marginal rate of federal, state
or local income taxation, respectively, for the calendar year in which
the Tax Reimbursement Payment is to be made.
(b) For purposes of determining whether any of the Covered
Payments will be subject to the Excise Tax and, if so, the amount of
such Excise Tax,
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(i) such Covered Payments will be treated as
"parachute payments" within the meaning of Section 280G of the Code and
all "parachute payments" in excess of the "base amount," as defined
under Section 280G(b)(3) of the Code, shall be treated as subject to
the Excise Tax, unless and except to the extent that, in the opinion of
the Company's independent certified public accountants, which, in the
case of Covered Payments made after the Change in Control Date, shall
be the Company's independent certified accountants appointed prior to
the Change in Control Date, or tax counsel selected by such accounts,
(collectively, the "Accounts"), such Covered Payments, in whole or in
part, either do not constitute "parachute payments" or represent
reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code, in excess of the "base
amount," or such "parachute payments" are otherwise not subject to such
Excise Tax, and
(ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Accountants in
accordance with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Tax
Reimbursement Payment, the Executive shall be deemed:
(i) to pay federal income taxes at the highest
applicable marginal rate of federal income taxation for the calendar
year in which the Tax Reimbursement Payment is to be made,
(ii) to pay any applicable state and local income
taxes at the highest applicable marginal rate of taxation for the
calendar year in which the Tax Reimbursement Payment is to be made, net
of the maximum reduction in federal income taxes which would be
obtained from the deduction of such state or local taxes if paid in
such year, determined without regard to limitations on deductions based
upon the amount of the Executive's adjusted gross income, and
(iii) to have otherwise allowable deductions for
federal, state and local income tax purposes at least equal to those
disallowed because of the inclusion of the Tax Reimbursement Payment in
the Executive's adjusted gross income.
(d) (i) If, subsequent to the making by the Company of the
payment or the contribution provided for in the first sentence of
Section I.5.(a), the Excise Tax is determined by the Accountants to be
less than the amount otherwise taken into account hereunder in
calculating the Tax Reimbursement Payment made, the Executive shall
repay to the Company, at the time that the amount of such reduction in
the Excise Tax is finally determined, the portion of such prior Tax
Reimbursement Payment that has been paid to the Executive or to
federal, state or local tax authorities on the Executive's behalf and
that would not have been paid if such Excise Tax had been applied in
initially calculating such Tax Reimbursement Payment, plus interest on
the amount of such repayment at the rate provided for in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, if any
portion of the Tax Reimbursement Payment to be refunded to the Company
has been paid to any federal, state or local tax authority, repayment
thereof shall not be required until actual refund or credit of such
portion has been
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made to the Executive, and interest payable to the Company shall not
exceed interest received or credited to the Executive by such tax
authority for the period it held such portion. The Executive and the
Company shall mutually agree upon the course of action to be pursued,
and the method of allocating expenses thereof, if the Executive's good
claim faith for refund or credit is denied.
(ii) If, subsequent to the making by the Company of the
payment or the contribution provided for in the first sentence of
Section I.5.(a), the Excise Tax is determined by the Accountants to
exceed the amount otherwise taken into account hereunder at the time
the Tax Reimbursement Payment is made, including, but not limited to,
by reason of any payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement Payment, the Company
shall make an additional Tax Reimbursement Payment in respect of such
excess, which Tax Reimbursement Payment shall include any interest or
penalty payable with respect to such excess, at the time that the
amount of such excess is finally determined.
(e) The portion of the Tax Reimbursement Payment attributable
to Covered Payments shall be paid to the Executive or contributed for
the benefit of the Executive to a "rabbi" trust established by the
Company prior to the Change in Control Date within ten business days
following the payment of the Covered Payments. If the amount of such
Tax Reimbursement Payment, or portion thereof, cannot be finally
determined on or before the date on which payment is due, the Company
shall either pay to the Executive or contribute to the aforesaid
"rabbi" trust an amount estimated in good faith by the Accountants to
be the minimum amount of such Tax Reimbursement Payment and shall pay
the remainder of such Tax Reimbursement Payment, including applicable
interest thereon determined under Section 1274(b)(2)(B) of the Code, as
soon as the amount thereof can be determined, but in no event later
than 45 calendar days after payment of the related Covered Payments. If
the estimated Tax Reimbursement Payment exceeds the amount subsequently
determined to have been due, such excess shall be repaid or refunded
pursuant to the provisions of Section I.5.(d).
6. SUPPLEMENTAL PENSION: If the Executive is not fully vested
under the Enhance Reinsurance Company Pension Plan (the "Pension Plan")
and he or she is a participant in the Enhance Reinsurance Company
Supplemental Pension Plan (the "Supplemental Plan"), then the Executive
shall receive, in a single lump-sum payment, an amount equal to the
amount the Executive would have received under the Supplemental Plan
had the Executive become fully vested under the Pension Plan on the day
immediately preceding his or her Date of Termination. The aforesaid
payment shall be reduced by any amount the Executive is entitled to
receive under the Supplemental Plan.
II. FULL SETTLEMENT AND MITIGATION:
The Company's obligation to make payments provided for in this
agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including, without limitation, any set-off,
claim, counterclaim, recoupment, defense or other legal
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or equitable right which the Company may have against the Executive or others
whether by reason of subsequent employment of the Executive or otherwise. In no
event shall the Executive be obligated to seek other employment by way of
mitigation. Likewise, the amount of any benefit or payment provided under this
agreement shall not be reduced by any compensation earned by the Executive
through either employment with another employer or self-employment, or by any
retirement-type benefits or unemployment benefits to which the Executive may be
entitled.
III. RESTRICTIVE COVENANTS:
1. The Executive shall at all times, now and forever, hold in a
fiduciary capacity for the benefit of the Company and shall not exploit, use,
sell, publish, disclose, communicate or divulge in any manner whatsoever to any
person or entity any trade secret or confidential information, knowledge or data
regarding the Company, its subsidiaries or affiliates. The provision of this
Section III shall not apply to any truthful statement required to be made by the
Executive pursuant to an order of a court or other body having lawful
jurisdiction over such matter.
2. The Executive shall not, directly or indirectly, for a period of one
year after the date of the Termination Event employ, or solicit for employment
or advise or recommend to any other person or entity that such person or entity
employ or solicit for employment any person employed at that time or within one
year theretofore by the Company or its subsidiaries or other affiliates.
3. It is understood and agreed that, if the Executive violates and
breaches either Section III.1 or III.2, the Company will suffer irreparable
damage and that the Company shall be entitled to injunctive relief to prevent
such a breach. Resort to such equitable relief, however, shall not constitute a
waiver of any other rights or remedies the Company may have, and the Executive
shall repay to the Company 95% of the payments made under this agreement and/or
the Company shall be entitled to recover 95% of the amounts paid to the
Executive without waiving the right to pursue any other available legal or
equitable remedies.
IV. SUCCESSORS AND ASSIGNMENT:
1. This agreement shall inure to the benefit of and be binding upon the
Company, and the Company shall require any successor to the Company, or any part
thereof, including but not limited to subsidiaries or affiliate, whether direct
or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, to expressly assume and perform this agreement in the same manner and
to the same extent as the Company would be required to perform. In the event of
such succession, references to the Company herein shall thereafter be deemed to
include such successor. Any failure by the Company to obtain assumption of this
agreement by a successor prior to the effectiveness of any such succession shall
be a breach of this agreement. Such breach shall entitle the Executive to
terminate the Executive's employment at anytime within twelve months after such
succession and thereafter to receive compensation and benefits under this
agreement from the Company in the same amount as the Executive would be entitled
to hereunder if the Executive were to terminate his or her employment for Good
Reason during the Protection Period. Any failure by the Executive to exercise
any right to terminate his or her employment under this Section IV shall not
affect any other right of the Executive under this Agreement, and this agreement
shall continue to remain binding on the Company in the same manner and to the
same extent as the successor would be required to perform them if the successor
had assumed this agreement in it entirety without any change thereto.
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2. This agreement is personal to the Executive and shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
V. LEGAL FEES AND EXPENSES:
The Company shall pay all reasonable attorney fees and expenses
incurred by the Executive in connection with, but not limited to, a bona fide
dispute regarding the application of any and all the provisions under this
Agreement, the Executive's seeking to obtain or enforce any right or benefit
provided under this Agreement, or in connection with any tax audit or proceeding
to the extent attributable to the application of Section 4999 of the Code to any
payment of benefit provided hereunder. Payment under this Section V shall be
made within ten business days after delivery of the Executive's written request
for payment accompanied by such evidence of fees and expenses incurred as the
Company reasonably may require.
VI. TERMINATION PROCEDURES:
1. During the Protection Period any termination of the Executive's
employment by reason of a Termination Event must be preceded by a written
"Notice of Termination" from one party hereto to the other party hereto in
accordance with Section VI. For purposes of this agreement, a "Notice of
Termination" shall mean a written notice that shall (a) specify the Executive's
date of Termination, which shall not be more than 60 days from the date the
Notice of Termination is given (the "Date of Termination"), (b) indicate the
notifying party's opinion regarding the specific provisions of this agreement
that apply to such termination of employment and (c) set forth in reasonable
detail the facts and circumstances claimed to provide a basis for the
application of the provisions indicated.
2. Termination of the Executive's employment shall occur on the
specified Date of Termination even if there is a dispute between the parties
relating to the provisions of this agreement. Except as provided for in Section
VIII, if Notice of Termination is given by either party to this agreement by
reason of a Termination Event, the Company shall pay all amounts due the
Executive under Section I whether or not a dispute exits between the Executive
and the Company relating to the provisions of this agreement.
3. If within 30 days of receiving Notice of Termination the party
receiving such notice notifies the other party that a dispute exits as to the
provisions of this agreement that apply to such termination, the dispute shall
be resolved either (a) by mutual written agreement of the parties hereto or (b)
by a final judgment, order or decree of a court having competent jurisdiction,
which is not further appealable or with respect to which the time for appeal
therefrom has expired and no appeal has been perfected. The parties to this
Agreement shall pursue the resolution of such dispute with reasonable diligence.
Within ten business days after such resolution, any party owing any payments to
the other party pursuant to such resolution and/or this Agreement shall make all
payments together with annual compounded interest accrued thereon at a rate
equal to the interest rate payable on one-year U. S. Treasury Bills in effect as
of the business day coincident with or next following the Date of Termination.
4. Except as otherwise provided in Section VIII, in any proceeding,
regardless of who initiates such proceeding, in which payments of severance
benefits or other benefits or payments under this Agreement is at issue, the
burden of proof that any termination of the Executive's employment has been for
Cause or without Good Reason shall be upon the Company or its
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successor, and the standard of proof to be met with respect thereto shall be
clear and convincing evidence.
VII. NOTICES:
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given or
delivered:, if delivered in person with signed acceptance of such personal
delivery, on the date of such delivery; or if sent by a recognized overnight
courier service, or by certified U.S. Mail, return receipt requested, on the
date of receipt. Notice to the Company shall be sent to:
Enhance Financial Services Group Inc.
335 Madison Avenue
New York, New York 10017
Attention: Elaine J. Eisenman
Executive Vice President
Notice to the Executive shall be sent to the address listed on the last page of
this agreement.
VIII. TERMINATION IN ANTICIPATION OF CHANGE IN CONTROL:
1. The Executive's employment shall be deemed to have been terminated
by the Company without Cause during the Protection Period if the Executive's
employment is terminated by the Company otherwise without Cause not during the
Protection Period and such termination of employment (a) was at the request of a
third party that has theretofore taken steps reasonably calculated to effect a
Change in Control; or (b) otherwise arose in anticipation of a Change in
Control.
2. The Executive's employment shall be deemed to have been terminated
by the Executive for Good Reason during the Protection Period if the Executive
otherwise terminates his or her employment for Good Reason not during the
Protection Period and the circumstances or event that constitutes Good Reason
(a) occurs at the request of a third party that has theretofore taken steps
reasonably calculated to effect a Change in Control; or (b) otherwise arose in
anticipation of a Change in Control.
3. In the event of a termination of employment described in this
Section VIII, the Executive shall be entitled to all payments and benefits to
which the Executive would have been entitled had such termination occurred
during a Protection Period, except that the Executive shall not be entitled to
receive any payments or benefits under this agreement, and the Company shall
have no obligation to pay any payments or benefit hereunder, as a result of the
termination of the Executive's employment, unless and until the Change in
Control Date occurs within 90 days after termination of the Executive's
employment and, in the reasonable judgment of the Company, the Executive is
entitled to payment of benefits hereunder by reason of the applicability of
either Section VIII.1 or VIII.2. Notwithstanding any provision of this agreement
to the contrary, for purposes of this Section VIII only, the burden of proving
that the requirements of Section VIII.1 or VIII.2 have been met shall be on the
Executive, and the standard of proof to be met by the Executive shall be clear
and convincing evidence.
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IX. MISCELLANEOUS:
1. Amendment, Modification and Waiver: No provision of this agreement
may be amended, modified, waived or discharged unless such amendment,
modification, waiver or discharge is approved by the Board and is agreed to in
writing and signed by the Executive and such officer of the Company as may be
specifically designated by the Board subsequent to the Board's approval of such
amendment, modification waiver or discharge. No waiver by either party hereto at
any time of any breach of, or failure to comply with, any condition or provision
of this agreement that is to be satisfied or performed by the other party hereto
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any subsequent time.
2. Entire Agreement: This agreement contains the entire agreement of
the parties concerning the subject matter, and all promises, representations,
understandings, arrangements and prior agreements concerning the subject matter
are merged herein and superseded hereby.
3. Governing Law and Venue: The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
New York applicable to agreement made entirely to be performed within such
jurisdiction. The party bringing any action under this Agreement shall only be
entitled to choose the federal or state courts in the State of New York as the
venue for such action, and each party consents to the jurisdiction of the court
chosen in such manner for such action.
4. Taxes: The Company shall be entitled to withhold from any payments
made hereunder, applicable federal, state or local income and payroll taxes as
the Company determines it is required to withhold under law.
5. Validity: The invalidity or unenforceability of any provision of
this agreement shall not affect the validity or enforceability of any other
provision of this agreement, which shall remain in full force and effect.
6. No Right to Continued Employment: Nothing in this agreement shall be
deemed to give the Executive the right to be retained in the employ of the
Company or to interfere with the right of the Company to discharge the Executive
at any time, subject in all cases to the terms of this agreement.
7. Termination of Agreement: Notwithstanding anything in this agreement
to the contrary, this agreement may be terminated by the Company at any time
prior to the Change in Control Date if the Executive fails to carry out the
material responsibilities assigned to the Executive, including without
limitation those related to the effectuation of the transaction looking to the
Change in Control.
8. Waiver under Severance Payment Plan: Should the Executive become
entitled to receive payments and benefits under this Agreement, the Executive
hereby automatically waives all rights to receive any payments under the
Company's Severance Payment Plan.
X. DEFINITIONS:
1. "Accountants" shall have the meaning set forth in Section I.4.
2. "Annual Cash Compensation" means the total of:
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(a) the Executive's stated annual base salary
determined immediately prior to Notice of Termination, but in no event
less than the Executive's stated annual base salary in the year in
which the Change in Control Date occurs; plus
(b) the Executive's bonus paid by the Company for the
year immediately preceding the year in which Notice of Termination is
given, but in no event shall it be less than the bonus paid in the year
immediately preceding the year in which the Change in Control Date
occurs (provided, that, for purposes of this clause (b), if the
Executive shall have been employed by the Company for less than the
entire such relevant preceding calendar year, then the applicable bonus
for this clause (b) shall, in lieu of that set forth above, be the
target bonus which would have payable to the Executive in respect of
such relevant preceding calendar year); plus
(c) the amount of any cash received or entitled to be
received prior to Notice of Termination as a "flex perquisite," but in
no event less than the amount of cash received or entitled to be
received as a "flex perquisite" from the Company in the year in which
the Change in Control Date occurs; plus
(d) the amount of the premium paid by the Company, on
behalf of the Executive for executive supplemental long-term disability
insurance.
3. "Benefit Period" shall have the meaning set forth in Section I.3.
4. "Board" means the Board of Directors of the Company and, except for
purposes of Section X.6(d), the Compensation and Nominating Committee thereof.
5. "Cause" means:
(a) the willful and continued failure of the
Executive to substantially perform the Executive's duties with the
Company, other than any such failure resulting from incapacity due to
physical or mental illness, after a written demand for substantial
performance is delivered to the Executive by the Board or the chief
executive officer of the Company which specifically identifies the
manner in which the Board or chief executive officer of the Company
believes that the Executive has not substantially performed his or her
duties; or
(b) the willful engaging by the Executive in illegal
conduct or gross misconduct that is demonstrably injurious to the
Company.
For purposes of this Section X.5, no act or failure to act on
the part of the Executive shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith and without reasonable belief
that the Executive's action or omission was in the best interest of the Company.
Any act, or failure to act, based upon the instructions or prior approval of the
Board or chief executive officer of the Company or the Executive's superior or
based upon the advice of counsel for the Company, shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company. The cessation of employment of the Executive
shall not be deemed to be for Cause unless and until there shall have been
delivered to the Executive, as part of the Notice of Termination, a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the entire Board, at regularly
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scheduled Board meeting or at a Board meeting called and held for the purpose of
considering such termination, finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in clause (a) or (b) of
this Section X.5 and specifying the particulars thereof in detail. Such
resolution shall be adopted only after reasonable notice of such Board meeting
is provided to the Executive and the Executive is given an opportunity to be
heard before the Board.
6. "Change in Control" shall occur when:
(a) The "beneficial ownership" (as defined in Rule
13d-3 of the Securities Exchange Act of 1934) of securities
representing more than 35% of the combined voting power of the Company
is acquired by a person or entity other than the Company, any trustee
or other fiduciary holding securities under an employee benefit plan of
the Company or an affiliate thereof, or any entity owned directly or
indirectly by the shareholders of the Company in substantially the same
proportion as their ownership of the Company; or
(b) Consummation of a merger or consolidation of the
Company with or into any other entity other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent,
either by remaining outstanding or by being converted into voting
securities of the surviving entity, more than 65% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; or
(c) The shareholders of the Company approve a plan to
sell or otherwise dispose of all or substantially all of the Company's
assets or adopt a plan for the Company's liquidation; or
(d) During a period of two consecutive years,
individuals who at the beginning of such period constitute the Board
and any new director, other than a director designated by a person who
has entered into an agreement with the Company to effect a transition
described in clause (a) or (b) of this Section X.5, whose election by
the Board or nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of the period or
whose election was previously so approved, ceases for any reason to
constitute a majority thereof.
However, in no event shall a Change in Control be deemed to have
occurred with respect to any Executive who is part of a purchasing group which
consummates the Change in Control transaction. The Executive shall be deemed to
be part of the purchasing group for purposes of the proceeding sentence if the
Executive is an equity participant in the purchasing entity or group of
individuals, except for: (i) passive ownership of less than 3% of the stock of
the purchasing entity; or (ii) ownership of equity participation in the
purchasing entity which is otherwise not significant, as determined prior to the
Change in Control by a majority of continuing directors who are not employees of
the Company or any of its subsidiaries or other affiliates.
7. "Change in Control Date" means the date on which a Change in Control
shall be deemed to have occurred.
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8. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and shall also include the regulations and ruling promulgated
thereunder.
9. "Covered Payments" shall have the meaning set forth in Section I.4.
10. "Excise Tax" shall have the meaning set forth in Section I.4.
11. "Good Reason" shall mean the occurrence, during the Protection
Period, of any one or more of the following without the Executive's express
written consent:
(a) The assignment to the Executive of duties
inconsistent in any substantial respect with the Executive's position,
authority, duties, responsibilities and status (including offices,
titles and reporting requirements), or any substantial changes in such
position, authority, duties, responsibilities and status from those
previously held by the Executive prior to the Change in Control event,
as applicable. The Executive's position, authority, duties,
responsibilities and status shall not be regarded as substantially
inconsistent with or substantially changed from previous position,
authority, duties, responsibilities or status merely by virtue of the
fact that there has been a Change in Control.
(b) A reduction in the Executive's stated annual base
salary determined immediately prior to the Change in Control Date and
which shall include any cash perquisite payment and any insurance
premium payment,
(c) A reduction of the Executive's annual target
bonus opportunity (excluding any annual reduction that applies to all
executives of the Company),
(d) A reduction in the Executive's level of
participation in or benefits provided under any short- or long-term
incentive plan of the Company, including, but not limited to incentive
compensation in the form of cash, stock or stock options, in effect as
of the Change in Control Date,
(e) A material reduction, in the aggregate, in the
Executive's level of participation in and benefits provided to the
Executive under the Company's employee welfare, retirement, fringe
benefit, vacation and sick leave plans, policies and practices,
including, but not limited to, retirement, 401(k), severance, medical,
dental, life, health, short- and long-term disability and flexible
benefits,
(f) A change of more than 50 miles in the office or
location at which the Executive is based, or
(g) A failure of the Company to have a successor
assume this Agreement pursuant to Section IV of this Agreement.
For purposes of this definition of "Good Reason," any good faith
determination of "Good Reason" made by the Executive shall be conclusive.
12. "Notice of Termination" shall have the meaning set forth in Section
V.1.
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13. "Protection Period" shall have the meaning set forth in Section I.
14. "Tax Reimbursement Payment" shall have the meaning set forth in
Section I.4.
15. "Termination Date" shall have the meaning set forth in Section V.
1.
16. "Termination Event" shall mean, upon a Change in Control, an action
of the Company, or the successor to the Company under Section IV, or any of
their respective subsidiaries or affiliates, resulting in either (a) the
involuntary termination of employment of the Executive other than for Cause or
(b) the resignation of the Executive for "Good Reason."
ENHANCE FINANCIAL SERVICES GROUP INC.
By:__________________________________________
Name: Daniel Gross
Title: President
EXECUTIVE:
__________________________________________
Name:
Address:
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